Leapfrog Strategic Analysis

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LeapFrog Business Proposal

Table of Contents
Major SWOT issues identified3
Strategy Selected12
Strategic Alternatives14
Strategy Selection Criteria18
Information Systems/Infrastructure24

Brief Management Summary
LeapFrog Enterprises, Inc. was founded in 1995 in Emeryville, California. They design and develop products that are technologically and educationally based for consumers from the time they are infants until they complete grade school. Their products are available domestically and internationally. In order to further expand the distribution of their products, LeapFrog plans to partner with Disney Interactive Studios to develop and release games based on the LeapFrog educational model for use on popular gaming systems such as Wii, XBox, and Playstation. LeapFrog's strategy for future growth is to decentralize their distribution and game delivery system from being exclusively proprietary to being compatible with systems consumers already own and use for entertainment purposes. This will allow LeapFrog to take advantage of the popularity of these gaming systems, as well as to reach new consumers who might not otherwise consider LeapFrog products for their children.  

Current Company Problem
A key issue for LeapFrog is bridging the gap between education and entertainment. While their products are highly educational, their products are not entertaining enough to keep children interested once the novelty of the product wears off. An identified weakness in LeapFrog's current operating strategy is the short product lifespan, on average, about two or three years. LeapFrog currently depends on the shorter product lifespan, coupled with the continual release of new products, to combat the affect of product age on consumer interest. LeapFrog's electronic gaming competition includes Nintendo Wii, Xbox360, and PS3, which all use a single console for their products and games. LeapFrog's learning products, however, each require the consumer to purchase a separate platform with which to run the software. This reduces LeapFrog's overall perceived and real consumer value for their products and has the potential to alienate the lower-income segment that may not be able to afford to update their electronic learning equipment as frequently. Major SWOT issues identified


Name Recognition
LeapFrog has leveraged itself as a fun and functional education provider, and because of this, is widely recognized as an internationally accepted maker of learning tools by parents and educators.

Learning Path System
This system, which connects through the company’s Scout and Violet products, allows LeapFrog to develop a close relationship with the customer and user. Based on personal learning information of each child, Learning Path makes recommendations for advanced learning software for that specific child, with the goal of maintaining a long-term learning partnership Strong Cash Flow

Although sales during the first three quarters of 2009 were hard-hit by residual inventory from 2008, net sales in the fourth quarter alone rose an impressive 36.9% at $188.6 million. Primary factors contributing to this rapid increase were the absence of 2008 inventory, as well as the unprecedented sales from LeapFrog’s new Tag and Scout lines, and their software based books. LeapFrog has since reduced its inventory levels, and continues to actively market these new products under their largely successful new Learning Path strategy, which has substantially lowered the company’s marketing costs.

In 2009, a major reduction in LeapFrog’s cost structure reduced LeapFrog’s operating expenses by 31.1%, or $75.3 million. This has dramatically lowered LeapFrog’s cost of doing business.  As the...
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